Item 1. Business
Item 1. Business
Overview
We are a biopharmaceutical company dedicated to improving the lives of patients living with solid tumors. Profound advancements in oncology drug development have expanded the treatment options available to cancer patients, yet the need for additional treatment options exists.
Our preclinical program, CTIM-76, is an anti-CD3 x anti-Claudin 6 (“CLDN6”) antigen bispecific monoclonal antibody (“bsAb”) that is intended to redirect T-cell-mediated lysis toward malignant cells expressing CLDN6. CLDN6 is a tight junction membrane protein target expressed in multiple solid tumors, including ovarian, lung, and testicular, and absent from or expressed at low levels in healthy adult tissues.
On March 22, 2023, we announced a portfolio prioritization and capital allocation strategy, including discontinuing the development of ONA-XR and focusing on the development of CTIM-76. Based upon the challenging market conditions for emerging companies, the increasingly competitive landscape for breast cancer treatments, recent study findings, and other factors, we decided to cease development and explore strategic options for ONA-XR. As a result, we will no longer primarily focus on female cancers.
Recent advances in the treatment of metastatic breast cancer point toward a more competitive environment in the coming years, such as promising Phase 3 clinical data for emerging product candidates, including Enhertu and capivasertib. Additionally, in the ongoing Phase 2 OATH trial evaluating ONA-XR in combination with anastrozole, elevated liver function tests (“LFTs”) were identified in three patients, including in one patient who discontinued treatment, although none of the elevated LFTs were considered serious adverse events. We determined that significant incremental program costs and delays were likely to be required to analyze and potentially mitigate future LFT abnormalities. By ceasing development of ONA-XR, we expect to have sufficient cash and cash equivalents to fund our operations into late 2024.
Beyond these product candidates, we continue to evaluate opportunities to expand our pipeline. We believe our team and capabilities position us to be a leader in developing novel therapies targeting solid tumors. Collectively, our management team has experience identifying and characterizing the mechanisms that drive cancer initiation and subsequent relapse in various cancer indications and who have been associated with the development of products such as Kisqali (ribociclib), Arimidex (anastrozole), and Afinitor (everolimus) to treat such cancers. We retain full worldwide development and commercialization rights to certain CTIM-76 patents in the field of bispecific antibodies and we retain worldwide development and commercialization rights for ONA-XR outside of Greater China.
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Our product candidates are shown in the table below:
(1) Tyligand Biosciences Ltd licensed rights to ONA-XR in China, HK, Macau
Our Product Pipeline and Development
CLDN6xCD3 bispecific antibody program: CTIM-76
Our preclinical program, CTIM-76, is an anti-Claudin 6 x anti-CD3 (“CLDN6xCD3”) bsAb that is intended to redirect T-cell-mediated lysis toward malignant cells expressing CLDN6. CLDN6 is a tight junction membrane protein target that has high prevalence across many cancers, including ovarian, lung and testicular, and absent from or expressed at low levels in healthy adult tissues. Due to this prevalence, we, along with several other pharmaceutical companies, including BioNTech SE (“BioNTech”) and Amgen Inc. (“Amgen”), are developing anti-CLDN6 antibodies and/or bispecific antibodies. The structural complexity of CLDN6 and its similarity to proteins expressed on healthy tissue, particularly Claudin 3 (“CLDN3”), Claudin 4 (“CLDN4”), and Claudin 9 (“CLDN9”), make selectivity a key development challenge that must be addressed. CTIM-76 investigational new drug (“IND”)-enabling studies are ongoing, with an IND filing to support human clinical trials expected in the first quarter of 2024.
PR antagonist program: ONA-XR
Prior to the portfolio prioritization and capital allocation strategy announced on March 22, 2023, we were primarily focused on developing treatments for female cancers. Currently, there are no approved therapies that selectively target progesterone receptor positive (“PR+”) cancers. Preclinical and clinical data suggest that ONA-XR has anticancer activity by inhibiting PR binding to chromatin, downregulating cancer stem cell mobilization and blocking immune evasion. ONA-XR was most recently being evaluated in two key Phase 2 trials (OATH and SMILE), and one Phase 1b/2 trial (ELONA) in women with metastatic breast and endometrial cancers. These trials are intended to establish safety, pharmacokinetics, pharmacodynamics, and anti-tumor activity at the recommended Phase 2 dose of ONA-XR to guide potential advancement in Phase 3 development. We are exploring strategic options for ONA-XR. Below is a description of the clinical trials to evaluate ONA-XR, which we expect to wind down promptly on an orderly basis:
• OATH trial: Phase 2 IST in collaboration with Jefferson Health to evaluate ONA-XR in combination with Arimidex (anastrozole) in PR+ endometrial cancer.
• ELONA trial: Phase 1b/2 trial in partnership with The Menarini Group ("Menarini”) to evaluate ONA-XR in combination with ORSERDU TM ( elacestrant), Menarini’s selective estrogen receptor degrader, in patients with locally advanced or metastatic breast cancer who have received prior treatment with a cyclin-dependent kinase 4/6 (“CDK4/6”) inhibitor.
• SMILE trial: Phase 2 IST in collaboration with Wisconsin Oncology Network (WON) to evaluate ONA-XR in combination with Faslodex (fulvestrant) in second line (“2L”) or third line (3L) metastatic breast cancer. This trial is intended to evaluate potential ONA-XR plus Faslodex drug synergy after treatment failure of CDK4/6 and/or PIK3α inhibitors. As part of the trial, a pharmacokinetic and pharmacodynamic
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(PK/PD) sub-study is also intended to evaluate the uptake of radiolabeled progesterone (F-FFNP) via positron emission tomography (PET) imaging in breast tumors to determine target engagement.
• Additional ISTs : Two other academic initiated trials are also ongoing, including a Phase 2 IST initiated by Memorial Sloan Kettering Cancer Center (“MSK”) to evaluate ONA-XR in combination with Arimidex in recurrent granulosa cell tumors (“GCT”) of the ovary.
Other preclinical programs
In addition to our product candidates, we are leveraging our knowledge in solid tumors and female cancers to pursue discovery stage research programs. We continue to evaluate new opportunities to expand our pipeline.
CLDN6xCD3 bispecific antibody program: CTIM-76
Background CLDN6
CLDN6 is an oncofetal tight junction protein involved in the cell-to-cell adhesion of epithelial and endothelial cell sheets. Although epigenetically silenced in healthy adult human tissues, CLDN6 expression has been found in ovarian, gastric, pediatric, and other cancer tissues and can lead to a poor prognosis. Monoclonal antibody (MAb) discovery against CLDN6 has been encumbered by the high homology of endogenously expressed CLDN9, which varies from CLDN6 by only three amino acids in the extracellular domain.
Proposed mechanism of action
Rationale for bispecific antibody
Cytotoxic T cells are considered to be the most potent effector cells of the immune system. As a consequence, broad T cell activation can lead to significant and sometimes lethal side effects. Therefore, to harness the potential of cytotoxic T cells, therapeutic strategies seek to pair T cell activation with drug targets that are restricted to cancer tissue so as to avoid unwanted toxicity. CLDN6 expression is restricted to various cancer types (i.e., a tumor specific antigen or TSA), making it an ideal target to help T cells recognize and eliminate cancer cells. Recently, a class of bispecific antibodies (TSAxCD3) with a native immunoglobulin format has emerged that can efficiently trigger T cell–mediated killing of tumor cells by linking a T cell to a tumor cell and activating the CD3/t cell receptor complex, as shown above.
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CLDN6 expression in cancer versus normal tissue
Source: Cancer RNAseq data from The Cancer Genome Atlas (TCGA); normal tissue RNAseq data from the Genotype-Tissue Expression (GTEx) project.
Preclinical data
CTIM-76 is a Claudin 6 and CD3 bispecific antibody capable of binding to tumor cells expressing Claudin 6 and stimulating intra-tumoral T cells by the CD3 arm that is designed to be activated only upon tumor engagement while silent elsewhere. Claudin 6 is expressed on multiple solid tumors such as ovarian, lung and testicular. As shown below, CTIM-76 exhibits excellent selectivity and specificity for CLDN6. Preclinical studies of CTIM-76 show it effectively maintains a strong tumor binding property and anti-tumor activity attributable to a synergistic effect of both Claudin 6 antibody and CD3 antibody while avoiding systemic immunotoxicity commonly seen with CD3 antibodies as a drug class. CTIM-76 has the potential for convenient dosing and scalable manufacturing to address the significant number of patients who are potentially eligible for CTIM-76 therapy.
An important aspect of CTIM-76 is the ability of the bispecific to preferentially target CLDN6 over related proteins. There is high sequence homology (~95%) between CLDN6 and CLDN9 in the extracellular loops, making the isolation of a CLDN6-specific antibody challenging. As shown below, CTIM-76 preferentially targets CLDN6,
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with minimal activity against CLDN9-expressing cells. Further, no binding was observed to other CLDN family proteins (CLDN3 and CLDN4) that have <85% homology in the extracellular loops.
Study design: K562 cells stably over-expressing CLDN3, CLDN4, CLDN6, or CLDN9 were co-cultured with human T-cells at an E:T ratio of 10:1 for 48 hours. Cytotoxicity was determined by luminescence imaging.
CTIM-76 has the potential for a wide therapeutic window, which is the difference between the dose required for the intended therapeutic effect and the dose required to elicit an unwanted side effect. The therapeutic goal therefore is to maximize cancer cell death through selective immune activation. CTIM-76 was evaluated in preclinical assays to determine the risk of on-/off-target immune system activation. As shown below, preclinical data supports the potential to dose at levels that promote cancer cell killing but have manageable levels of free cytokine production, thereby potentially reducing the risk of cytokine release syndrome. In the assay, cytokine production was evaluated in the exogenous (CLDN6-K562) cell line model at 48 hours. Cytokine production happened well above the concentration of maximal killing (TDCC EC50 = 0.0004 nM), indicating a potentially wide therapeutic window.
Study design: K562 cells stably over-expressing CLDN6 and luciferase were co-cultured with human T cells at an E:T ratio of 10:1 for 48 hours. Cytotoxicity was determined by luminescence imaging.
Comparison of CLDN6 development programs
We have performed head-to-head in vitro studies comparing internally developed CLDN6 monoclonal and bispecific antibodies and those from BioNTech and Xencor, Inc. (“Xencor”). Antibodies for BioNTech and comparative data for Xencor were derived from publicly available reports published independent of us and may differ in material ways from the actual antibody that is in development.
The results presented in the below table have been derived from publicly available reports of preclinical studies run independently of our preclinical results. We have not performed any head-to-head clinical trials comparing any of these other therapies with CTIM-76. As such, the results of these other product candidates may not be comparable to clinical results for CTIM-76. The design of these other studies vary in material ways from the design of the
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preclinical studies for CTIM-76. For further information and to understand these material differences, you should read the relevant reports.
We believe it is useful to compare the in vitro results achieved by BioNTech and Xencor’s product candidates and approaches as a proxy to understand the estimated selectivity differences of these therapies.
Context Xencor BioNTech
Program
CTIM-76 XmAb541 BNT211 and BNT142
Antibody Format
Bispecific
CLDN6xCD3 Bispecific
CLDN6xCD3 CLDN6
CAR-T, and
CLDN6xCD3 (bi(sFc))
Stage
Preclinical Preclinical Phase 1, Phase 1
Status
Active Active Active
Selectivity CLDN6:9
>1000x 10x 7x
Other preclinical programs
In addition to our product candidates, we previously leveraged our knowledge in hormone-dependent cancer to pursue discovery stage research programs.
In November 2015, we entered into a patent license agreement, as amended, (the “Drexel License Agreement”) with Drexel University for license rights to patents for certain intellectual property and know-how related to certain Sigma1 technology. As part of a strategic review of our pipeline, we terminated the Drexel License Agreement, effective as of April 27, 2022.
Our collaboration and license agreements
Collaboration Agreement with Tyligand Bioscience
In March 2020, we entered into a process development agreement (the “Tyligand Process Development Agreement”) with Tyligand Bioscience (Shanghai) Limited (“Tyligand”) for the development, manufacturing, registration and future commercialization of ONA-XR.
Under the terms of the Tyligand Process Development Agreement, Tyligand was solely responsible for the design and optimization of an improved manufacturing process for ONA-XR. Upon completion of specific performance-based milestones, we and Tyligand entered into a license agreement (the “Tyligand License Agreement”) whereby Tyligand was granted the exclusive right to ONA-XR and is solely responsible for the development and commercialization of ONA-XR in China, Hong Kong and Macau (the “Territory”). We retain rights in the rest of the world to commercialize ONA-XR.
Under the Tyligand Process Development Agreement, we paid Tyligand $0.8 million and issued 111,576 warrants to purchase shares of common stock at an exercise price of $7.17 per share upon successful completion of the manufacturing development plan in 2021. The warrants were cancelled in connection with our initial public offering. In addition, $2.0 million will be payable upon the completion of scale-up of the first cumulative 100 kilograms of the Good Manufacturing Practices (“GMP”)-grade compound and $3.0 million upon our completion of scale-up of the first cumulative 300 kilograms of the GMP-grade compound. In consideration of and upon Tyligand’s successful completion of the development plan, within 30 days at the end of each calendar quarter, we shall pay Tyligand 1% of net sales of finished product utilizing the compound substantially manufactured in accordance with the process and specifications outlined in the Tyligand Process Development Agreement. This agreement terminated in August of 2021, subject to certain surviving and ongoing obligations.
Per the Tyligand License Agreement, Tyligand shall pay us a non-refundable, non-creditable royalty at a rate in the mid-single digits of the net sales of each product in the Territory in each calendar quarter commencing with the first commercial sale of such product in the field in the Territory and ending upon the latest of (i) the sale of a generic product in the Territory and (ii) 15 years after the date of the first commercial sale of product in the Territory.
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Collaboration and Licensing Agreement with Integral Molecular
In April 2021, we entered into a collaboration and licensing agreement with Integral Molecular, Inc. (“Integral”) (the “Integral License Agreement”) for the development of a CLDN6 BsAb for cancer therapy. Under the terms of the Integral License Agreement, we and Integral will develop CLDN6 bispecific antibodies that trigger the activation of T cells and eliminate cancer cells displaying CLND6. We will conduct preclinical and all clinical development, as well as regulatory and commercial activities through exclusive worldwide rights to develop and commercialize the novel CLDN6 candidates. We paid an upfront license fee of $0.3 million and granted 418,559 shares of Series A Stock with a fair market value of approximately $2.8 million. As a part of the Integral License Agreement, Integral will be eligible to receive remaining development and regulatory milestone payments totaling approximately $55 million (of which a $0.5 development milestone was achieved in the second quarter of 2022 and subsequently paid), sales milestone payments totaling up to $130.0 million, and tiered royalties of up to 12% of net sales of certain products developed under the Integral License Agreement. We shall continue to pay royalties on a country-by-country and licensed-by-licensed product basis, until the later of: (i) the expiration of the patent covering such product in such territory, (ii) the expiration of any regulatory exclusivity granted with respect to a product in such territory and (iii) 10 years from the first commercial sale of such product in such country. The Integral License Agreement shall continue in full force and effect, until either (a) royalty payments for all products in all territories have expired or (b)(i) we provide written notice of termination, (ii) during three successive quarters we do not use commercially reasonable efforts to develop a product, (iii) if the agreement is breached or (iv) if a party goes bankrupt. On March 20, 2023, we amended the Integral License Agreement to remove the previously agreed to second milestone payment and to change the amount of the third milestone payment to increase such payment by the amount of the prior second milestone payment and to add payment for third party research funding obtained and used by Integral in connection with the development of CTIM-76.
Menarini Clinical Trial Collaboration and Supply Agreement
On August 1, 2022, we entered into a Clinical Trial Collaboration and Supply Agreement (the “Menarini Agreement”) with Berlin-Chemie AG - Menarini Group - (“Menarini”). Pursuant to the Menarini Agreement, Menarini agreed to provide, at no cost to us, elacestrant, its nonsteroidal combined selective estrogen receptor modulator and selective estrogen receptor degrader therapy, for use in combination with ONA-XR, in a planned Phase 1/2 clinical trial (the “Menarini Study”). Under the Menarini Agreement, we agreed to sponsor, fund and conduct the Menarini Study. Under the Menarini Agreement, Menarini agreed to manufacture and supply elacestrant at Menarini's cost and for no charge to us for use in the Menarini Study and to provide cell-free nucleic acid analysis of the anonymized blood samples of all Menarini Study patients. We own any data and sample testing results produced in the Menarini Study. We and Menarini jointly own any rights to inventions relating to the combined use of elacestrant and ONA-XR, while Menarini owns certain inventions solely related to elacestrant and we own certain inventions solely related to ONA-XR. We and Menarini formed a joint development committee responsible for coordinating all activities between the parties under the Menarini Agreement. Additionally, had we received a bona-fide third-party offer to sell, divest or license ONA-XR, we would have been required, subject to certain exceptions, to inform Menarini of the receipt of an offer and, if Menarini timely provided proposed terms for such a transaction in writing, we would have been required to consider such terms in good faith. On March 21, 2023, we mutually terminated the Menarini Agreement, and the parties agreed to reasonably cooperate towards an orderly wind-down of the related clinical trial.
Commercialization
We retain full worldwide development and commercialization rights to certain CLDN6 antibody patents in the field of bispecific antibodies and retain worldwide development and commercialization rights for ONA-XR outside of Greater China. We periodically evaluate out-license opportunities for our product candidates, including our current exploration of strategic options for ONA-XR, and seek to identify drug candidates for novel indications and/or patient subpopulations with an oncology focus that we might in-license. Our commercial plans and strategy for any of our programs may change as programs advance, markets change, and we receive more clinical data, and will depend on availability of current and future capital.
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Sales and marketing
We currently have no sales, marketing, or commercial product distribution capabilities, and we may explore partnerships with larger pharmaceutical organizations that already have these capabilities. We intend to build the necessary infrastructure and capabilities over time for the United States, and potentially other regions, following further advancement of a product candidate.
Manufacturing
We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We rely, and expect to continue to rely, on third parties for the manufacture of our current and any future product candidates for preclinical and clinical testing, as well as for commercial manufacture if any product candidate obtains marketing approval. We also rely, and expect to continue to rely, on third parties to package, label, store and distribute our current and any future investigational product candidates, as well as for our commercial products if marketing approval is obtained. We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment and personnel while also enabling us to focus our expertise and resources on the development of our current and any future product candidates.
To date, we have obtained active pharmaceutical ingredients (“API”) and drug product for our product candidates from several third party contract manufacturers. We continue to develop our supply chain for CTIM-76 and intend to put in place additional framework agreements under which third-party contract manufacturers will generally provide us with necessary quantities of API and drug product on a project-by-project basis based on our development needs.
On November 7, 2022, we entered into a Development and Manufacturing Services Agreement (the “Lonza Development Agreement”), with Lonza Sales AG (“Lonza Sales”) and Lonza AG (collectively, “Lonza”). Under the terms of the Lonza Development Agreement, Lonza will provide services relating to the development and manufacture of CTIM-76 (the “Product”) in accordance with the project plan attached to the Lonza Development Agreement and any other work as may be agreed to between us and Lonza. The Lonza Development Agreement will terminate upon the completion of the agreed upon services, unless earlier terminated by us or Lonza for uncured material breaches, insolvency of the other party, or if a party determines that it is not possible to complete the services for material scientific or material technical reasons.
We can terminate certain services under the Lonza Development Agreement, but in addition to payment for certain non-cancellable commitments, we would be required to pay a cancellation fee, such fee to be determined depending on the timing of such notice prior to the commencement of the related services.
The License Development Agreement requires us to obtain a license from Lonza prior to receipt from Lonza of the Product or in vivo clinical studies or any other commercial use or sale of the Product, which we entered into concurrently with the License Development Agreement, as further described below. Additionally, should we desire to either manufacture the Product itself or have it manufactured by a third party, we would be required to obtain Lonza’s consent (not to be unreasonably withheld, conditioned or delayed) and would need to enter into a separate technology transfer agreement with Lonza for a non-exclusive license to the extent necessary to manufacture, have manufactured and supply the Product at a licensing fee up to £750,000.
The Lonza Development Agreement also contains customary representations, warranties, indemnification and other obligations of us and Lonza.
On November 7, 2022, we entered into a License Agreement (the “Lonza License Agreement”) with Lonza Sales. Under the terms of the Lonza License Agreement, to the extent incorporated into the Product, Lonza granted us a non-exclusive license to use certain proprietary Lonza intellectual property and systems for us to develop, manufacture and commercially exploit the Product.
We shall pay certain royalties and annual payments in respect of the manufacturing and sale of Product, which amounts shall be determined by the party manufacturing the Product and ranges from a potential annual payment of
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up to less than $500,000 and a royalty on net sales from 0% up to a low single digit percentage. The royalty payments and annual payments would be reduced in certain circumstances, including should the valid claims for any such patent rights not exist in the country in which such Product is being sold, and the royalty payments would expire upon the later of the expiration of the licensed patents in the country in which such Product is being sold, the expiration of the licensed patents in the country in which such Product is being manufactured, and 10 years from the first commercial sales of the Product in such country of sale.
The Lonza License Agreement continues until terminated, and we or Lonza may terminate the Lonza License Agreement for uncured material breaches or insolvency of the other party. We can unilaterally terminate the Lonza License Agreement with prior written notice to Lonza, and Lonza can also unilaterally terminate the Lonza License Agreement upon certain actions by us.
The Lonza License Agreement also contains customary representations, warranties, indemnification and other obligations of us and Lonza.
As we advance our current and any future product candidates through development, we will consider our lack of redundant supply for the API and drug product for each product candidate to protect against any potential supply disruptions.
We generally expect to rely on third parties for the manufacture of any companion diagnostics we may develop.
Competition
The pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense competition, and a strong emphasis on proprietary products. While we believe that our technology, the experience of our executive and scientific team, research, clinical capabilities, development experience and scientific knowledge provide us with competitive advantages, we face increasing competition from many different sources, including pharmaceutical and biotechnology companies, academic institutions, governmental agencies and public and private research institutions. Product candidates that we successfully develop and commercialize may compete with existing therapies and new therapies that may become available in the future.
Many of our competitors, either alone or with their collaborators, have significantly greater financial resources, established presence in the market, expertise in research and development, manufacturing, preclinical and clinical testing, obtaining regulatory approvals and reimbursement and marketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Additional mergers and acquisitions may result in even more resources being concentrated in our competitors.
Our commercial potential could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market or make our development more complicated. The key competitive factors affecting the success of all of our programs are likely to be efficacy, safety and convenience.
For CTIM-76, our CLDN6xCD3 bispecific antibody, we are aware of several companies developing antibodies against this target, including Abbvie Inc., Amgen, Astellas Pharma Inc., AstraZeneca plc, BioNTech, Chugai Pharmaceutical Co., Ltd., Daiichi Sankyo Company, Limited (“Daiichi Sankyo”), I-Mab, NovaRock Biotherapeutics Inc., and Xencor. These companies are developing CDLN6 products in naked antibody, bispecific, CAR-T, and mRNA vaccine formats. To our knowledge, Amgen, BioNTech, and Daiichi Sankyo have the only CLDN6 products in clinical trials.
Intellectual property
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We strive to protect and enhance the proprietary technology, inventions and improvements that are commercially important to our business, including seeking, maintaining and defending our patent rights. We retain full worldwide development and commercialization rights to certain CLDN6 antibody patents in the field of bispecific antibodies and we own the issued patent and patent applications relating to ONA-XR. Our policy is to seek to protect our proprietary position by, among other methods, filing patent applications in the United States and in jurisdictions outside of the United States directed to our proprietary technology, inventions, improvements and product candidates that are important to the development and implementation of our business. We also rely on trade secrets and know-how relating to our proprietary technology to protect our product candidates and continuing to innovate to develop, strengthen and maintain our proprietary position in the field of oncology. We also plan to rely on data exclusivity, market exclusivity and patent term extensions when available. Our commercial success will depend in part on our ability to obtain and maintain patent and other proprietary protection for our product candidates, technology, inventions and improvements; to preserve the confidentiality of our trade secrets; to defend and enforce our proprietary rights, including any patents that we may own or license in the future; and to operate without infringing on the valid and enforceable patents and other proprietary rights of third parties.
As of March 13, 2023, the Integral patent portfolio for CTIM-76 that we exclusively licensed pursuant to the Integral License Agreement includes one granted U.S. patent, two pending U.S. applications (including one provisional application), and 27 pending foreign applications. The U.S. patent is expected to expire between in 2040, subject to any extensions or disclaimers.
As of March 13, 2023, our patent portfolio with respect to our ONA-XR product candidate consisted of four issued U.S. patents, four pending U.S. patent applications, three unpublished PCT applications, ten granted foreign patents (including one granted Canadian patent, two granted Chinese patents, one granted Japanese patent, four granted Australian patents, one granted Hong Kong patent, and one granted Mexican patent), and 16 pending foreign patent applications (including one Australian application, three Canadian applications, two Chinese applications, three European regional patent applications, three Hong Kong applications,two Japanese applications, and two Korean applications). Our granted U.S. patents, referenced above, have claims directed to our ONA-XR product candidate as pharmaceutical compositions, formulations, related methods of use, and methods of making. These U.S. patents are expected to expire between 2034 and 2036, subject to any extensions or disclaimers.
We also possess substantial know-how and trade secrets relating to the development and commercialization of our product candidates, including related manufacturing processes and technology.
With respect to our current and any future product candidates and processes, we intend to develop and commercialize in the normal course of business, and we intend to pursue patent protection covering, when possible, compositions, methods of use, dosing and formulations. We may also pursue patent protection with respect to manufacturing and drug development processes and technologies.
Issued patents can provide protection for varying periods of time, depending upon the date of filing of the patent application, the date of patent issuance and the legal term of patents in the countries in which they are obtained. In general, patents issued for applications filed in the United States can provide exclusionary rights for 20 years from the earliest effective filing date. In addition, in certain instances, the term of an issued U.S. patent that covers or claims an FDA approved product can be extended to recapture a portion of the term effectively lost as a result of the FDA regulatory review period, which is called patent term extension. The restoration period cannot be longer than five years and the total patent term, including the restoration period, must not exceed 14 years following FDA approval. The term of patents outside of the United States varies in accordance with the laws of the foreign jurisdiction, but typically is also 20 years from the earliest effective filing date. However, the actual protection afforded by a patent varies on a product-by-product basis, from country-to-country and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.
The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. No consistent policy regarding the scope of claims allowable in patents in the field of oncology has emerged in the United States. The relevant patent laws and their interpretation outside of the United States is also uncertain. Changes in either the patent laws or their interpretation in the United States and other countries may diminish our ability to protect our technology or product candidates and could affect the value of such intellectual
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property. In particular, our ability to stop third parties from making, using, selling, offering to sell or importing products that infringe our intellectual property will depend in part on our success in obtaining and enforcing patent claims that cover our product candidates, technology, inventions and improvements. We cannot guarantee that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications we may file in the future, nor can we be sure that any patents that may be granted to us in the future will be commercially useful in protecting our products, the methods of use or manufacture of those products. Moreover, even our issued patents may not guarantee us the right to commercialize our product candidates, if approved. Patent and other intellectual property rights in the pharmaceutical and biotechnology space are evolving and involve many risks and uncertainties. For example, third parties may have blocking patents that could be used to prevent us from commercializing our product candidates and practicing our proprietary product candidates, and our issued patents may be challenged, invalidated or circumvented, which could limit our ability to stop competitors from marketing related products or could limit the term of patent protection that otherwise may exist for our product candidates. In addition, the scope of the rights granted under any issued patents may not provide us with protection or competitive advantages against competitors with similar products. Furthermore, our competitors may independently develop similar products that are outside the scope of the rights granted under any issued patents. For these reasons, we may face competition with respect to our product candidates. Moreover, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any particular product candidate can be commercialized, any patent protection for such product may expire or remain in force for only a short period following commercialization, thereby reducing the commercial advantage the patent provides.
Government Regulation
Regulatory Pathway
We expect that CTIM-76 will be classified and regulated by the FDA as a biologic. We expect that ONA-XR will be classified and regulated by the FDA as a drug. A new drug application (“NDA”) is required to introduce a drug into interstate commerce. A biologics license application (“BLA”) is required to introduce a biologic product into interstate commerce. The specific requirements of NDAs and BLAs include applicant information, product information, manufacturing information, pre-clinical data, clinical data, and labelling. The most important, time-consuming, and expensive aspect of preparing for a BLA or NDA is conducting clinical trials to demonstrate safety and effectiveness. The requirements of such clinical trials heavily influence the eventual allowable product label claims. The FDA has a performance goal as defined in the Prescription Drug User Fee Act of 10 months for a standard submission and six months for priority review. It is not uncommon for NDAs and BLAs to require medical advisory board review prior to the FDA granting marketing approval. A facility inspection verifying the manufacturing systems is also usually performed prior to FDA approval.
We have in the past used and intend to continue to utilize the services of third-party experts to supplement internal regulatory planning and implementation.
Ongoing FDA Regulation
After the FDA permits a product to enter commercial distribution, numerous and pervasive regulatory requirements continue to apply to our business operations, products and technologies. These include:
• the FDA’s quality system regulation, or QSR, which requires manufacturers, including third party manufacturers, to follow stringent design, testing, production, control, supplier/contractor selection, complaint handling, documentation and other quality assurance procedures during all aspects of the manufacturing process;
• labeling and marketing regulations which require that promotion is truthful, not misleading, fairly balanced and provide adequate directions for use and that all claims are substantiated;
• advertising and promotion requirements, including FDA prohibitions against the promotion of products for uncleared, unapproved or off-label uses and FDA guidance on off-label dissemination of information and responding to unsolicited requests for information;
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• restrictions on sale, distribution or use;
• product establishment, registration and listing requirements and reporting requirements;
• recall requirements, including a mandatory recall if there is a reasonable probability that a product would cause serious adverse health consequences or death;
• an order of repair, replacement or refund; and
• post-market surveillance activities and regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data.
The FDA has broad post-market and regulatory enforcement powers. Manufacturers of biologic products and drug products are subject to unannounced inspections by the FDA and other state, local and foreign regulatory authorities to assess compliance with the QSR and other applicable regulations, and these inspections may include the manufacturing facilities of any suppliers.
Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions:
• warning letters, untitled letters, Form 483s, fines, injunctions, consent decrees and civil penalties;
• recall or seizure of products;
• operating restrictions, partial suspension or total shutdown of production;
• the FDA’s refusal of requests for approval of new products or indications for existing products;
• the FDA’s refusal to issue certificates to foreign governments needed to export products for sale in other countries;
• withdrawing approvals that have already been granted; and
• criminal prosecution.
Privacy and Security Laws
There are numerous U.S. federal and state laws and regulations related to the privacy and security of personal information, including health information. Among others, the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH), and their implementing regulations, (collectively referred to as “HIPAA”), establish privacy and security standards that limit the use and disclosure of protected health information (“PHI”) and require covered entities and business associates to implement administrative, physical, and technical safeguards to ensure the confidentiality, integrity and availability of individually identifiable health information in electronic form, among other requirements.
Violations of HIPAA may result in civil and criminal penalties. Companies subject to HIPAA must also comply with HIPAA’s breach notification rule which requires notification of affected patients and the U.S. Department of Health and Human Services (“HHS”), and in certain cases of media outlets, in the case of a breach of unsecured PHI. The regulations also require business associates of covered entities to notify the covered entity of breaches by the business associate. State attorneys general also have the right to prosecute HIPAA violations committed against residents of their states, and HIPAA standards have been used as the basis for the duty of care in state civil suits, such as those for negligence or recklessness in misusing personal information. In addition, HIPAA mandates that HHS conduct periodic compliance audits of HIPAA covered entities and their business associates for compliance.
Many states have laws that protect the privacy and security of sensitive and personal information, including health information, to which we are subject. These laws may be similar to or even more protective than HIPAA and other federal privacy laws. For example, California enacted the California Consumer Privacy Act (the “CCPA”),
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which creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal data. The CCPA went into effect on January 1, 2020, and the California Attorney General may bring enforcement actions for violations as of July 1, 2020. On January 1, 2023, California adopted the California Privacy Rights Act (“CPRA”), which amended the CCPA to enhance certain of the privacy protections for California consumers that were created by the CCPA. The enhancements include imposing additional compliance obligations for covered entities and removing certain exemptions previously available under the CCPA. While the California Attorney General retains civil enforcement authority, the CPRA also created the California Privacy Protection Agency to implement and enforce the law.
We may be subject to other state and federal privacy laws, including laws that prohibit unfair privacy and security practices and deceptive statements about privacy and security, laws that place specific requirements on certain types of activities, such as data security and texting, and laws requiring holders of personal information to maintain safeguards and to take certain actions in response to a data breach.
European Union member states, the United Kingdom, Switzerland and other jurisdictions have also adopted data protection laws and regulations, which impose significant compliance obligations. The EU-wide General Data Protection Regulation (“GDPR”) became applicable on May 25, 2018, replacing the previous data protection laws issued by each EU Member State based on the Directive 95/46/EC. Unlike the Directive (which needed to be transposed at national level), the GDPR text is directly applicable in each EU member state, resulting in a more uniform application of data privacy laws across the EU. The GDPR imposes onerous accountability obligations, requiring data controllers and processors to maintain a record of their data processing and policies. It requires data controllers to be transparent and disclose to data subjects (in a concise, intelligible and easily accessible form) how their personal information is to be used, imposes limitations on retention of information, increases requirements pertaining to pseudonymized (i.e., key-coded) data, introduces mandatory data breach notification requirements and sets higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities. Fines for non-compliance with the GDPR are significant—the greater of EUR 20 million or 4% of global turnover. The GDPR provides that EU Member States may introduce further conditions, including limitations, to the processing of genetic, biometric or health data. In the UK, the UK General Data Protection Regulation (the “UK GDPR”) came into effect on January 1, 2021. Similar to the GDPR, the UK GDPR sets out the key principles, rights, and obligations for most processing of personal data in the UK. The Data Protection Act of 2018, which came into effect on May 25, 2018 and was amended on January 1, 2021, works alongside and supplements the UK GDPR.
U.S. Healthcare Reform
Changes in healthcare policy could increase our costs and subject us to additional regulatory requirements that may interrupt commercialization of our products. By way of example, the Patient Protection and Affordable Care Act (“PPACA”) substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacted the pharmaceutical, medical device and biologics industries, among others.
Since its enactment, there have been judicial and Congressional challenges to certain aspects of PPACA, and there may be additional challenges and amendments to PPACA in the future. For example, in 2017, Congress enacted the Tax Cuts and Jobs Act, which eliminated the tax-based shared responsibility payment imposed by PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.”
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”), was passed, which among other things, allows for the Centers for Medicare & Medicaid Services (“CMS”) to negotiate prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D, beginning with 10 high-cost drugs paid for by Medicare Part D starting in 2026, followed by 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028, and 20 Part B or Part D drugs in 2029 and beyond. The legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing to comply with the legislation by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law or for taking price increases that exceed inflation. The legislation also caps Medicare beneficiaries’ annual out-of-pocket drug expenses at $2,000. The effect of the IRA on our business and the healthcare industry in general is not yet known.
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There will continue to be proposals by legislators at both the federal and state levels, regulators and third-party payors to reduce costs while expanding individual healthcare benefits. Certain of these changes could impose additional limitations on the prices we will be able to charge and/or patients’ willingness to pay for our products. While in general it is too early to predict what effect, if any, any future healthcare reform legislation or policies will have on our business, current and future healthcare reform legislation and policies could have a material adverse effect on our business and prospects.
Pricing and Reimbursement
In the United States and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend in part on the availability of reimbursement from third-party payors. Third-party payors include government health administrative authorities, managed care providers, private health insurers, and other organizations. These third-party payors are increasingly challenging the price and examining the cost-effectiveness of medical products and services. In addition, significant uncertainty exists as to the reimbursement status of newly approved healthcare products, and efforts are underway to reduce the cost of medical products and services overall. We may need to conduct expensive studies in order to demonstrate the cost-effectiveness of our products. Our current and any future product candidates may not be considered cost-effective. Decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. One third-party payor’s decision to cover a particular product or procedure using the product does not ensure that other payors will also provide coverage for the product. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate revenue levels. Future legislation could limit payments for our current and any future product candidates.
The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost containment programs to limit the growth of government-paid health care costs, including price controls, restrictions on reimbursement and requirements for substitution of less costly products. Adoption of government controls and measures, and tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for our products. The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and will continue to increase the pressure on medical product and service pricing.
Anti-Kickback and False Claims Laws
In the United States, the research, manufacturing, distribution, sale and promotion of pharmaceutical products and devices are subject to regulation by various federal, state and local authorities in addition to the FDA, including CMS, other divisions of HHS (e.g., the Office of Inspector General), the U.S. Department of Justice, state Attorneys General, and other federal, state and local government agencies. For example, sales, marketing and scientific/educational grant programs must comply with the Federal Food, Drug, and Cosmetic Act, the Anti-Kickback Statute, as amended, the False Claims Act, as amended, the privacy regulations promulgated under HIPAA, and similar state laws. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. All of these activities are also potentially subject to federal and state consumer protection and unfair competition laws.
As noted above, in the United States, we are subject to complex laws and regulations pertaining to healthcare “fraud and abuse,” including, but not limited to, the federal Anti-Kickback Statute, the federal False Claims Act, and other state and federal laws and regulations. The Anti-Kickback Statute makes it illegal for any person, including a biological product manufacturer (or a party acting on its behalf) to knowingly and willfully solicit, receive, offer, or pay any remuneration that is intended to induce the referral of business, including the purchase or order of an item for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. Violations of this law are punishable by up to five years in prison, criminal fines, administrative civil money penalties, and exclusion from participation in federal healthcare programs. In addition, many states have adopted laws similar to the Anti-Kickback Statute. Some of these state prohibitions apply to the referral of patients for healthcare services reimbursed by any insurer, not just federal healthcare programs such as Medicare and Medicaid. Due to the breadth of these federal and state anti-kickback laws and the potential for additional legal or regulatory change in this area, it
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is possible that our sales and marketing practices and/or our relationships with physicians might be challenged under anti-kickback laws, which could harm us. Because we plan to commercialize products that could be reimbursed under a federal healthcare program and other governmental healthcare programs, we plan to develop a comprehensive compliance program that establishes internal controls to facilitate adherence to the rules and program requirements to which we are subject.
The federal False Claims Act prohibits anyone from, among other things, knowingly presenting, or causing to be presented, for payment to federal programs (including Medicare and Medicaid) claims for items or services, including pharmaceutical products, that are false or fraudulent. Although we would not submit claims directly to payers, manufacturers can be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. In addition, our activities relating to the reporting of wholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state, and third-party reimbursement for our products, and the sale and marketing of our products, are subject to scrutiny under this law. For example, pharmaceutical companies have been prosecuted under the federal False Claims Act in connection with their off-label promotion of drugs. Penalties for a False Claims Act violation include three times the actual damages sustained by the government, plus mandatory civil penalties for each separate false claim, the potential for exclusion from participation in federal healthcare programs, and, although the federal False Claims Act is a civil statute, conduct that results in a False Claims Act violation may also implicate various federal criminal statutes. If the government were to allege that we were, or convict us of, violating these false claims laws, we could be subject to a substantial fine and may suffer a decline in our stock price. In addition, private individuals have the ability to bring actions under the federal False Claims Act and certain states have enacted laws modeled after the federal False Claims Act.
There are also an increasing number of state laws that require manufacturers to make reports to states on pricing and marketing information. Many of these laws contain ambiguities as to what is required to comply with the laws. In addition, a provision of PPACA, referred to as the Sunshine Act, requires pharmaceutical product manufacturers to track and report to the federal government certain payments or other transfers of value made to physicians, registered nurses and teaching hospitals, among others, in the previous calendar year. These laws may affect our sales, marketing, and other promotional activities by imposing administrative and compliance burdens on us. In addition, given the lack of clarity with respect to these laws and their implementation, our reporting actions could be subject to the penalty provisions of the pertinent state and federal authorities.
Other Federal Healthcare Fraud and Abuse Laws
We may also be subject to other federal healthcare fraud and abuse laws, including provisions of HIPAA, which prohibit knowingly and recklessly executing a scheme or artifice to defraud any healthcare benefit program, including private payors, as well as knowingly and willfully falsifying, concealing or covering up a material fact by any trick, scheme or device or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government-sponsored programs. Similar to the federal Anti-Kickback Statute, a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation.
Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act (the “FCPA”), prohibits U.S. businesses and their representatives from offering to pay, paying, promising to pay or authorizing the payment of money or anything of value to a foreign official in order to influence any act or decision of the foreign official in his or her official capacity or to secure any other improper advantage in order to obtain or retain business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records, which in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the corporation, including international subsidiaries, if any, and to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the
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preparation of financial statements. The scope of the FCPA includes interactions with certain healthcare professionals in many countries.
Human Capital
As of March 1, 2023, we had nine full-time employees, no part-time employees and one consultant who serves as an executive officer of the Company. None of these employees are represented by labor unions or covered by collective bargaining agreements. We believe that our employee relations are good.
Culture is a critical element in the management of our organization. Our talented employees are focused on driving our business with the foundation for all our efforts being to advance medicines for solid tumors. Our goal is that each colleague feels a deep connection to what they do, loves coming to work, and is aligned to our mission.
Culture begins with our hiring process and continues throughout an employee’s time with Context. We support our colleagues with a comprehensive offering of competitive pay and benefits.
Facilities
Our principal office is located in Philadelphia, Pennsylvania, where we lease approximately 3,500 square feet of office space pursuant to a sublease that expires in July 2023. Additionally, in March 2023, we entered into a direct lease for this same office space that begins on August 1, 2023 and is set to expire on August 31, 2024, pursuant to which we retain the right to renew the lease for an additional one-year term subject to notice to the landlord by December 31, 2023. We believe our facility is adequate to meet our current needs, although we may seek to negotiate new leases or evaluate additional or alternate space for our operations. We believe appropriate alternative space will be readily available on commercially reasonable terms.
Legal Proceedings
From time to time we may be involved in disputes or litigation relating to claims arising out of our operations. We are not currently a party to any legal proceedings that could reasonably be expected to have a material adverse effect on our business, financial condition and results of operations.
Corporate Information
We were incorporated under the laws of the State of Delaware in April 2021. Our corporate office is located at 2001 Market Street, Suite 3915, Unit #15, Philadelphia, PA 19103. Our telephone number is (267) 225-7416. We maintain an Internet website at www.contexttherapeutics.com. The information contained on our website is not incorporated by reference into this Form 10-K.
We make available free of charge under the “Investors & News” — “Financials” — “SEC Filings” section of our website all of our filings with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to such documents, each of which is provided on our website as soon as reasonably practicable after we electronically file or furnish, as applicable, the information with the SEC.
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